# Early Retirement – Playing With Numbers

Ever find yourself playing with numbers when you should be sleeping?

I sure do.

I was looking at my Ally account and happened to click on the “More Details” button/link which then showed me what my daily accrued interest looks like. I mean, it’s a simple calculation they’re using, but for some reason I find it exciting anyway.

Daily Accrued Interest = (Available Balance X 0.0099) / 365

For me, that works out to \$1.22 per day. And soon, that will be \$1.36/day!

Yeah, not exactly Bill Gates numbers here. In terms of money earned per second, it’s .000014 cents per second or in terms of minutes, it’s .00085 cents per minute.

So that made me wonder what it would take to reach different retirement numbers at 0.99%. Easy enough, just take the amount you want to earn per year and divide it by the APY you’re getting.

### Playing With Numbers

\$60,000 / 0.0099 = \$6,060,606.06 (Yikes)

In order to earn \$5,000 per month with a high interest savings account from Ally, you would need over \$6 million in the bank. What a waste!

Now let’s say we find an amazing CD with a 3% interest rate. Then what does it take?

\$60,000 / 0.03 = \$2,000,000.00

Now we’re getting somewhere. That number is still really high but not impossible to reach. However, I’m not a Rockefeller. I’m going to need a higher interest rate. What happens if I invest in index funds that average just 5%?

\$60,000 / 0.05  = \$1,200,000.00

Okay, now we’re really talking. That’s just \$1.2 million. Not only would I get to join the double comma (dos comas) club, but at just 5% I’d have enough money to live comfortably on in most places in the world.

Of course, it’s not outside the realm of possibility to beat 5%. For example, over the past 10 years, VTSAX has averaged around 8%. Plugging that number in should get us some interesting results.

\$60,000 / 0.08 = \$750,000.00

No double comma club there, but now I’m at least financially independent. And this assumes no diversification, which would obviously bring the average interest rate down but we’re playing with numbers here. (The total bond market index fund — VBFMX — has earned around 4.5% over the past 10 years). Assuming a weighted average for those two for an 80 / 20 portfolio, it would only bring the total interest rate down to 7.3.

( 80 X 8 + 20 X 4.5 ) / ( 80 + 20 ) = 7.3

\$60,000 / 0.073 = \$821,917.80

Not as clean a number, but perhaps leaning towards realistic. What if I want a little more money to play with? Say \$100k.

\$100,000 / 0.073 = \$1,369,863.01 (or roughly \$1.4 million)

### So How Much Should I Save?

Assuming I want to reach this number before I turn 65, and assuming I’m starting from \$0 at a salary of \$100,000 saving just 20%, 30% or 40%, how long would it take me to get there?

20% annual savings (\$20,000) invested at an average of 7.3% APY would take 25 years to get to \$1.4 million. Retirement age? 57.

30% annual savings (\$30,000) invested at an average of 7.3% APY would take 20.5 years to get to \$1.4 million. Retirement age? 52.

40% annual savings (\$40,000) invested at an average of 7.3% APY would take 17.5 years to get to \$1.4 million. Retirement age? 49.5.

While we’re at it, let’s try the same thing while aiming for the lower number of \$60,000.

20% annual savings (\$20,000) invested at an average of 7.3% APY would take 19 years to get to \$822k. Retirement age? 51.

30% annual savings (\$30,000) invested at an average of 7.3% APY would take 15 years to get to \$822k. Retirement age? 47.

40% annual savings (\$40,000) invested at an average of 7.3% APY would take 12.5 years to get to \$822k. Retirement age? 44.5.

Sure, I could have used one of the many calculators online for this stuff. Mr. Money Mustache has an excellent one! But sometimes it’s good just to figure the math out for yourself and go through some of the scenarios.

Another thing is that all of these scenarios suppose that I’m living purely off of interest from index funds. It says nothing about dividend payouts from individual stocks or investment property income. Both are avenues I intend on pursuing just to bring that year number down to just 10 years, which is the goal I’ve given myself on my about page. Oh, and also — I’m not starting from \$0. I’m starting from about \$100,000. If I decide to sell my house, I’ll be in even better shape.

This year has been an excellent year for savings … so far. As you know if you’ve been reading, a rough patch is coming. But that doesn’t mean I can’t maximize before then!

I should probably sleep now.

Until tomorrow!

Disclaimer: Any errors in math are totally not my fault because it’s nearly 2AM where I live and will be corrected once someone inevitably points them out, at which point I will recoil in horror and existential dread because I will be so much further from my goal; meanwhile, I will sleep in blissful ignorance.

Let me just say, today has been interesting.

So has the past month, for that matter. See, I’m currently a contractor and it was recently made very clear to me that I either join up as an employee or start looking for work elsewhere.

Of course, it was put in much nicer terms. I don’t work with monsters, after all. They value me as a team member and want to keep me on board. Had that not been the case, I suspect I would have been cut out a lot sooner. Luckily, I’m somewhat of a workaholic and the kind of work I do is in high demand for the time being. The only problem, dear friends, is that going from contract to salary is … tough. Rarely do you get the chance to do a straight contract-rate to salary conversion. In my experience, there’s always a cut. Always a price to pay for being a permanent member of the team with raises and the like.

So how much of a cut? Well, in my case, it’s about 38%. You might be familiar with that amount as most of what I save every month.

Yeah.

So I’m dealing with that at present.

Plus, I have another offer on the table that would mean commuting about 50 miles each way, but it’s for \$15,000 more. I’ve done the math a number of different ways and even with tax deductions, traveling that distance would quickly beat that \$15k bump into submission. In other words — it would work out to be about the same because I would spend a lot more on automobile-related expenses. Plus, there’s that whole opportunity cost of being in traffic for 2-4 hours every day. Yeah, the more I talk about that offer, the less desirable it sounds.

There are more perks to keeping the job I have now, of course. For example, I get to work from home every single day, which means I get to see my family. Every day. On top of that, I’ve been meaning to start a business for a long time and just haven’t gotten going. Keeping this job would mean there would be a certain … urgency … to that pursuit that wasn’t there before. I’d like to work that in my favor. There are parts of my brain sorting out the details right now (time to get some excellent sleep), but I now have an obvious challenge placed before me: earn the difference with a side business or bust.

It’s strange what times like these will do to your confidence and extremely important to reflect in order to turn emergencies like these into opportunities.

I mean, I’m not out of a job. By the time this change goes into effect, I will have fully funded my Emergency Fund and started investing. Things aren’t that bad. I’m just really bummed that I won’t get that big monthly infusion into my various retirement-focused accounts. The story I want this blog to reflect is that of someone who learned the error of their consumer ways a bit later, but not too late. Someone who faced successes despite bumps, setbacks and rough seas. Someone who doesn’t lie and pretend things are always happy.

I honestly hope that’s what you all take away from this.

For now, I’ve got a lot of thinking to do. A lot of talking to do with my wife. We have to make sure our expenses will be covered. Maybe this is the catalyst we needed to down-size the home (and mortgage payments with it) in an effort to live more simply.

Of course, I’ll keep you posted on where this takes me.

Wish me luck!

# My Retirement

Every once in a while, I think it’s a good idea for those of us walking along the path of financial independence to take a minute to envision what retirement would look like. Part of the reason for this is that it’s a visualization technique — something to help us refocus when we lose track. Something that gives us a light at the end of the tunnel. But additionally, it’s also to sort of recalibrate what makes sense given where we are. For some, retirement could mean what it does in the traditional sense — stopping work altogether to just live. For some, it could be stopping work to start a business. For others, it could be a mix of the two and that’s where I fall in line.

Personally, I never want to stop programming, but I also don’t want to have to program. I’d rather work on fun projects. When I as young and poor, a few of my many side projects actually took off and could have been immensely popular. Well, if I’d had the good sense to do something with them, but that’s for another post. So that’s the kind of programming I’d want to do. Creating things that just pop into my head.

Writing is another thing I love to do. I find excuses to write all the time. Mostly, I write for myself and occasionally I’ll publish something online. Oh, and I also write in this blog to help quench the need, but it’s always there. So for me, I’d have the freedom to take 4-5 hours out of my day to do those things (or not), as well as anything else I felt needed doing. Or there are days where you just feel like doing nothing.

What it comes down to is freedom. The way I envision my retirement basically involves writing (almost) every day in this blog, giving back to the community and then working on personal projects. There’s not much I’d change about the things that happen outside work hours. Except, maybe, I would put my phone down more and be 1,000 times less stressed.

### Times Flies When You’re Having Fun

I’d love to get some feedback from someone who is already technically retired on this one. One of my main fears about having nothing to do is that my days, normally slowed at least by the seconds ticking achingly by as I wait for my “shift” to be over, would start to become a blur much like the time travel scene in The Time Machine:

I don’t know if the speed of time is enough reason to warrant ongoing intermittent misery though. I, for one, am willing to take a chance on that.

### Time Freed Up Is But A Vacuum

The next fear I have is that my time, no longer monopolized by work, would become filled in by other things without leaving room for the things I want to do. Of course, this is less a problem with the nature of retirement and more a problem with the nature of managing relationships with those around you. When people want your time, it’s rarely a bad thing, but it can get in the way of overall happiness and enjoyment. Two things I want to maximize once I stop clocking in every day.

A great way to battle the vacuum filling up with undesirable activities is to set regularly scheduled time for yourself. With my wife, for instance, I would argue that while my time wasn’t directly being converted to money, the tighter budget we would inevitably end up living on would be much eased with some solid irons in the fire. In other words, I would inevitably work on projects that would result in even more passive income for the family. Scheduling time for myself would also help to combat my sitting on the couch and watching movies all day. (Yes, sadly I would have to fight myself on that one. Remember my weakness: entertainment).

### Either We Redefine Retirement Or We Switch Words

So instead of stopping work, I would replace work. Now that sounds like a “retirement” I can get behind. At least for the day to day. One thing I rarely get to do is travel (now there’s a novel idea)! But I don’t want to just travel, I want to go on long, slow vacations. The kind that let you immerse yourself in a place, its people, its food and its general culture. I honestly don’t know what we’d do about school for the kids, but that’s a problem I’d love to tackle, because it would mean I’d have retired within the next 10-15 years. For those following closely, that would mean retirement by about 45. Man, that sounds great.

And while I’m at it, one thing I rarely get to do is dedicate time to just helping other people. My friends, family or just people in need. Not necessarily with direct financial contributions, but with my time. That’s time I could spend with my parents as they age, or my still-living grandparents. Honestly, a life spent toiling away is one of the worst things we’ve come up with as a species.

### What If Everyone Were Retired?

Sometimes I find myself wondering what life would be like if everyone had a basic income that allowed them to live a moderate lifestyle. This is usually queued by one of those out-of-nowhere news stories about universal basic income, but nonetheless it makes me think. Obviously there are less-desirable parts of society that just need getting done and people might not feel inclined to get their hands dirty if basic needs were met. This is something to be considered. Society still needs plumbers, functioning sewers and street sweeping, that sort of thing. And then there’s the argument that having jobs fills up the days of those that would otherwise find themselves with idle hands. Insert something here about idle hands being the tools of the devil.

But then there’s the positive. Maybe instead of working all the time, the prerequisite for that universal basic income is an ongoing education. Never mind where all the money is going to come from to fund this (we’re dreaming here). It’s funny, my wife and I tell our kids that it’s our job to work and it’s their job to go to school. Why not make it everyone’s job? Less stress, more education, more time for travel. Seems like a win-win to me. But I digress.

### My Retirement

Although I plan to make another post of this nature in the far future, I’ll conclude this one with a witty quote. It’s important, after all, to semi-frequently revisit this topic and ask the question, “What will I do when I don’t have to do anything?” Right now, because I am in charge of making sure my family is taken care of, I am forced to trade in hours upon hours of my life. That’s work. I don’t want to do work. I want to use my talents to make this microcosm around me a better place.

Oh, and here’s that witty quote:

“Nothing is work unless you’d rather be doing something else.” – George Halas